Participating life insurance
As the name suggests, participating insurance policy empowers the policy holder to participate in the company’s profit making. The main difference between non-participating and participating plan is that the former only gives the guaranteed benefits to the insured person; while the later pays him the company dividend also.The insurance company shares the profit with its participating policy holders on a yearly basis. The company used to pay the profit share in either of two ways – dividend or bonus. Now it is up to the insured person how he uses that amount. He can use it to pay the premium; or use it to generate further interest on the dividend. However, unlike the guaranteed benefits of non-participating policies, the bonus payment is not guaranteed in participating policy. The bonus is paid only if the company makes profit. It all depends on the performance of the insurance company.
The premium amounts are generally on the higher side in comparison to the non-participating policies.Again, comparing between participating and non-participating policies is a difficult task. Both are unique in their form and nature. Non-participating policies are for those who want to draw benefits from less investment. But individuals who are willing to earn a regular interest from the company, participating policy is the suitable option for them.